Cliff Feltham of the Daily Mail searches out some bargains

Some brave punters boldly go where big institutions no longer bother to tread. Many fund managers have lost interest in quoted small-cap stocks, and the number of small firms joining the stock market is in danger of being eclipsed by those packing their bags and returning to life as a private business.

Yet not all is doom and gloom in the City's bargain basement. Private investors willing to punt on shares in start-up ventures are giving the lightly regulated Ofex market its busiest spell since the early Nineties.

Ofex is no playground for widows, orphans or those of a nervous disposition, as this newspaper has repeatedly warned. But it has unearthed the odd gem.

Robotic Technology was floated by a former Finnish powerboat champion who devised a computer controlled system for grinding propellers. The shares started life at 20p and recently moved to the junior AIM market where they stand at 323p.

Po Na Na, a chain of Moroccan-themed late-night drinking bars, has been the toast of investors all the way from 10p to 117 1/ 2p. It is frequently tipped as a bid target. Net-Bet, an Internet bookmaker, has shown a clean pair of heels from its starting price of 70p and is now 280p. Plenty of action is promised.

There are some promising newcomers. The same team that floated Robotic is offering shares in MILS Technology, which produces low-level emergency lighting suitable for guiding passengers on liners to safety in an emergency. Home Place, a home furnishings group run by former Texas Homecare boss Mervyn Fogel, has just raised £1m for more stores.

How many of these companies will be around in five years? Impossible to tell. But that is the risk you take backing ventures in their infancy with, in some cases, inexperienced and untried management.

It is not unfair to say that Ofex was once a bareback ride into cowboy country. The chairman of a small public company delivered a blistering indictment of the quality of the advisers used to produce a prospectus after losing £300,000 on one well publicised Ofex failure.

'The warnings in the document were totally insufficient,' he said. 'The figures were pure fantasy. The quality of the directors was questionable to put it mildly.' But much has changed.

Ofex is technically not a market but a dealing facility run by JP Jenkins, a London Stock Exchange member firm regulated by the Securities and Futures Authority.

Its boss, John Jenkins, has met his critics head on. He has set up a much more rigorous vetting system for companies seeking admission. He investigates the background of directors. Twenty-five companies were removed last year for being 'unsuitable'.

Jenkins must still shudder at the mention of Skynet, a system for tracking stolen cars by satellite. The price surged from 27p to 275p before deals were halted amid allegations of share manipulation

Another firm, Display.IT, collapsed after making wildly inaccurate trading statements. Recall, a car security company, put its main subsidiary into liquidation. Its chief executive said he was too busy to tell investors, who continued to deal in the shares.

Jenkins says: 'We have systems in place to look closely at companies and the quality of the directors. But we remain a facility for people who love a punt.' Shares in nearly 200 companies are traded on Ofex - from 'white knuckle' start-ups to established companies like Weetabix and soccer clubs Arsenal, Glasgow Rangers and Manchester City.

So far this year £50m has been raised and a string of firms are waiting to exchange shares for the odd £1m. John Bridges, of Matrix Corporate Finance, which has taken a number of companies to Ofex, said: 'It is the only source of true venture capital in the UK. Entrepreneurs realise it is the place to attract money from private clients and venture capital trusts.'

There are obvious cost advantages. Raising £1m on Ofex costs £150,000 in fees. It is twice as expensive to list on AIM, which has failed to attract as much institutional support as it hoped, and where shares are often held so tightly that small investors find it hard to deal.

In the past Ofex companies have graduated to AIM. If AIM loses its attraction, Ofex investors may be put off by the fear of ending up in an investment cul-de-sac. But they can take heart from the fact that the infant market looks rather healthier than its elder brother.